Question 1: Johnson Corporation decided to pay a dividend of $2.00 per share. Th

Question

Question 1: Johnson Corporation decided to pay a dividend of $2.00 per share. The corporation has 2,500,000 shares authorized, 800,000 shares issued, and 765,000 shares outstanding on the date of declaration. Makes the entries necessary for the dividend on the following dates:

June 15, 2010 Date of declaration

July 13, 2010 Ex-dividend date

July 15, 2010 Date of record

August 1, 2010 Date of payment

Question 2: Sprague, Inc., has 10,000,000 shares of $2 par value common stock authorized and 1,500,000 shares issued and outstanding. The stock had a fair market value of $20 per share on November 15, 2010, when the board of directors declared a 5 percent stock dividend to holders of record on November 27, 2010. The new shares were distributed on December 10, 2010. Make the journal entries to record the declaration and distribution of the stock dividend.

Question 3: The charter of the Sanders Corporation authorizes the issuance of 1,500,000 shares of no-par common stock and 500,000 shares of 8 percent, $50 par value, cumulative preferred stock. These events affected shareholders’ equity during the first year of operation: 1. 200,000 shares of common stock were sold for $15 per share. 2. 40,000 shares of preferred stock were sold at $52 per share. 3. A building worth a fair market value of $560,000 was acquired for a cash payment of $150,000 and 17,000 shares of commons stock. 4. 30,000 shares of common stock were issued for $690,000 cash. 5. A dividend of $1 per share for common and $4 per share for preferred stock was declared. Make the journal entries to record the transactions just described.

Question 4: McDougall Corporation is authorized to issue 500,000 shares of $40 par value, 10 percent cumulative preferred stock and 2,000,000 shares of $0.01 par value common stock. The following transactions summarize the events affecting its capital stock accounts during its first year of operations. 1. The company issued 800,000 shares of common stock for cash of $20 per share. 2. 100,000 shares of preferred stock were sold for cash of $44 per share. 3. McDougall repurchased and held as treasury stock 10,000 shares of its own common stock at $19 per share. 4. 2,000 shares of the treasury stock were reissued at $23 per share. Make the journal entries to record these events.

Explanation / Answer

Ans-

1

JE

June 15, 2010,

Date of declaration on outstanding shares

Retained earning A/c Dr. $1,530,000

To Dividend Payable (765000*2) $1,530,000

July 13, 2010,

Ex-dividend date

No entry

July 15, 2010,

Date of record

No entry

August 1, 2010,

Date of payment

Dividend payable $1,530,000

to Cash/Bank   $1,530,000

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